Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009. The process that has to be followed, before any remittance can be made, is as under—

Step 1 : Obtain a certificate from a Chartered Accountant in Form No 15CB

Step 3:Take Print out of Form 15CA with system generated acknowledgement number. The same must be signed by person authorised to sign the return of income of the remitter or a person so authorised by him in writing

Step 4: Submit in duplicate Form 15CA and Form 15CB along with Form A2 to Remitting Bank (Authorised Dealer)

In exercise of the powers conferred by section 295 read with sub-section (6) of section 195 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.a These rules may be called the Income-tax (Seventh Amendment) Rules, 2009.

1.b They shall come into force with effect from 1st July, 2009.

2. In the Income-tax Rules, 1962, after rule 37BA, the following rule shall be inserted, namely:- “Furnishing of information under sub-section (6) of section 195.

37BB. (1) The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificate from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961.

(2) The information to be furnished under sub-section (6) of section 195 shall be in Form No. 15CA and shall be verified in the manner indicated therein and the certificate from an accountant referred to in sub-rule (1) shall be obtained in Form No. 15CB.

(3) The information in Form No. 15CA shall be furnished electronically to the website designated by the Income-tax Department and thereafter signed printout of the said form shall be submitted prior to remitting the payment.

(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture, transmission of data and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner specified.

As per the law in force, business income of a nonresident recipient is chargeable to tax in India only if it is arising or accruing or deemed to arise or accrue in India provided that they have permanent establishment in India. Since the very nature of income is business income, the payments do not require withholding of tax at source u/s 195 of the Income-tax Act. As Sec 195 is not applicable, Form 15CA and Form 15CB is not required.

For all remittance to Non-Residents under Section 195 of the Income-tax Act, Form 15CA and Form 15CB is applicable. Interest payment made to foreign bank falls under Sec 195. In case of Mauritius as per DTAA if the funds are arranged from bonafide banking business, nil withholding tax (WHT) applicable. But still as the payment fall under Sec 195, at the time of interest remittance, form 15CA and form 15CB has to be submitted along with other documents to AD Bank stating nil tax applicable.

There is always a little bit of confusion as to what comes under business income and what under other remittances, for example- Registration fees paid for participation in a trade fair is a business income for the recipient or is it other remittances.

In the given example, registration fee will fall under business incomes for overseas supplier and if the supplier does not have permanent establishment in India, that Sec 195 does not become applicable. Thus no withholding tax.

Can we make changes in Form 15CB after it is uploaded on site? We had filed form 15CB online but in that form details of bank was wrong now we want to make remittance from other bank than how can we do ? Is there any provisions for revising or cancelling Form 15CB which is already filed.

Dear Sir, In case Form 15CA is erroneous, if a new 15CA is uploaded then the income tax data base will show 2 forms for one transaction. In that case the department may question why 2 Forms have been filed. Is there a mechanism to revise the form 15CA in such a way that the rectified Form 15CA alone should be considered by the tax department? Alternatively, can we write a letter to the department stating that there is a error in the 15CA [with acknowledgement number] and intimate them that the error has occurred. This may ensure that from the company side disclosure is made to the department about the error and they may consider the rectified 15CA alone.